Uchumi shares 'expected' to trade at higher value

Uchumi Supermarkets' shares are expected to retail at higher price than Sh14.50 registered when the company returns to the Nairobi Stock Exchange on Tuesday.

Speaking during investors' briefing ahead of return to trading at Nairobi Stock Exchange, the chief executive officer, Mr Jonathan Ciano said the company’s shares had appreciated since June 2006 when the company was suspended from trading after failure to meet financial obligations.

He said an evaluation conducted by accounting and management firm, KPMG had placed the value of shares at around Sh17.20.

“If you want to sell your Sh10 debenture it's expected it will go for above Sh17,” Mr Ciano said on Wednesday at Serena hotel.

The CEO however added that the market will determine the movement of the share price once it starts trading again.

According to estimates, the suspension locked up to Sh2.6 billion owed by about 12,000 shareholders (calculated at 14.50 which was the last trading price at NSE before it went under)

Mr Ciano said the company was now profitable after most of its branches posted profits that totalled Sh 1.37 billion last year. The gross sales in 2010 increased to 9.75 billion from Sh8.6 billion registered the previous year. Mr Ciano said the company had been reducing its operating expenses from 43 per cent in 2006 to about 16.4 per cent currently.

However, he expressed concerned over the rising inflation that reached 12 per cent last month, which is expected to erode the purchasing power.

“The basket is going to be smaller because of the slow flow of money. We are going to see the spread become wider while the customers will become more sensitive to prices,” he said.

Nevertheless, the company intends to increase its branches by opening in Kisumu and Nairobi. The company also plans to expand further in Dar-es-Salaam, Tanzania and Gulu in Uganda.

“Even if there is going to be change in the spending, we are selling things that people need,” Mr Ciano said when asked about the expected slow down in purchasing due to rising inflation.

He said the company projected to achieve between Sh3 billion and 5 billion in profits in the next five years.